TDCX Inc (TDCX) 2022 Q2 法說會逐字稿

Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome, and thank you for joining the TDCX Second Quarter 2022 Results Conference Call. (Operator Instructions) It's my pleasure, and I would now like to turn the conference over to the management. Please go ahead.

Hello, everyone, and welcome to TDCX Second Quarter 2020 Earnings Conference Call. I'm Jason Lim, the Head of Investor Relations. Allow me to introduce management on the call. We have our Executive Chairman, Founder and CEO; Mr. Laurent Junique; our CFO, Mr. Chin Tze Neng; and our VP of Corporate Development, Mr. Edward Goh. Before we continue, I would like to remind you that we will make forward-looking statements, which are subject to risks and uncertainties and may not be realized in the future. You should not see any reliance on any forward-looking statements. Also, this call includes the discussion of certain non-IFRS financial measures, such as adjusted EBITDA, adjusted EBITDA margin, adjusted net income and adjusted net income margins.

For reconciliation of the non-IFRS measures to the causes IFRS measures, please refer to our press release on the Form 6-K, which are available on our website. We have provided a convenient translation for the translation of Singapore dollar to U.S. dollar. This was on at a rate of 1 to SGD 1.38. This should not be construed as a representation that any Singapore dollar amount can be converted into USD at this or any other way.

Our management will now share updates on the operating and financial performance. With that, let me hand over the call to Laurent. Laurent, please?

Hello, everyone, and welcome to our results briefing for second quarter of 2022. We are happy to deliver another strong set of quarterly results. Once again, the people of TDCX have put together another outstanding performance and have navigated to the market's overall macro come challenges. I'm so proud of the determination result, and I think we appreciate the tremendous efforts, temps on competency and building a wonderful working environment for whole has paid off. I would also like to thank all our clients for their support and putting their faith in us. And I'm also happy to report that during the quarter, we had our carbon footprint reporting by British Standards Institute, 14064-1. And so, our corporate social responsibility initiatives, we just incorporated with TDCX Foundation.

Our focus here is on building long-term partnerships to uplift communities in Asia through digital empowerment, specifically with 3 key themes of digital access, digital ligate and capability in terms of readiness for digital work and small business support. Let me next cover some highlights of our financial performance. We delivered robust revenue growth in Q2 2022 as revenue was 23.3% to USD 170 million or SGD 162 million. This was driven by strong contributions from plants across key verticals, including digital advertising and media and travel and hospitality and especially from our (inaudible) client who are growing at the fastest pace in listing at twice the pace of our group revenue growth in Q2 2022. Now in terms of revenue contribution from verticals of travel and hospitality, including our airline clients, continued its recovery trajectory and was up 25% compared to Q2 2020.

While revenue from travel and hospitality is now higher compared to Q2 2021, we still on 16% below our order in this space in 2019. There's still some room for us to grow, and this will depend on the outlook for global and especially engine travels. The prospect of North Asia travel reopening is an exciting one, of course, but this is not confirmed yet as I speak. On the FinTech side, we continue to rise at high percentages year-on-year, and it remains our third largest vertical. To recap, we serve payment gateway, price exchanges and public inter companies. And as shared before, we have always taken a careful approach to Crypto while we are happy with our progress in this space. The revenue contribution is around 1% which we feel the risks are manageable. We are looking to add more fintech clients and also to continue to bring in a variety of clients across different verticals, such as e-commerce to grow this business.

On the digital advertising and media vertical, we continue to deliver double-digit percentage growth year-on-year, powered by our strength in the sales of digital marketing service and the acquisition of new clients. We have on boarded the leading video social media platform and is started to contribute in Q2. As shared before, it will take time for any new funds to start contributing meaningfully in terms of group revenue, but we are happy with the progress we've made there. On our earnings and quality growth in terms as we pressed on with our business expansion, we maintain our focus on policy growth, adjusted net income, which strips out the performance share plan costs for a like-for-like basis comparison rose 35.5% year-on-year to USD 22 million or SGD 30 million. We continue to deliver our set-leading profitability with adjusted EBITDA margin of 31% in Q2 2022, and I want to take this opportunity to thank our CFO, Mr. Chin and his team of incredible professionals for the continuous efforts in cost control and efficiency plan.

The quality of our earnings growth is also shown in the strong cash flow conversion. Q2 2020 net cash from operating activities was USD 76 million, almost doubling year-on-year. Our CFO will share with the shareholder the numbers in the later section. From a business segment point of view from Q2 2022, we have renamed our content monitoring and moderation services as content, trust and safety and services. The change reflects the industry's broader new compare relation services out of a larger group of services that includes other trust and safety-related services and help enhance our ability to track our performance. The content trust and safety service comprise conciliation and (inaudible) trust and safety services such as those to ensure authenticity and accuracy of listing as well as data and location services for machine leave.

Our total revenue from Southeast Asia stands at 91% of first half of 2022 revenues -- in the latest addition of the Internet economy research program by Google, the Masa, Southeast Asia now has a total of 440 million Internet dealers, while the Southeast Asian Internet economy is expected to reach $360 billion by 2025, powered by incomes, food delivery and digital financial services. With our unique footprint, PBCS provide investors with strong exposure to Southeast Asia, fast-growing digital transformation. Our condemn Indonesia and Vietnam are on track, and we aim to launch operations there before the end of the year. The new markets add further flexibility to offer key Southeast onshore languages in a multi window centralized model as well as a decentralized model. In addition, much stronger amidst the changes in the CX outsourcing space. This is even more timely now with the rapid changes in the business environment and function will provide us with a competitive edge going forward.

Now on time wings, we have continued our business segment momentum, signing up a total of 25 gigs for the first half of 2022, more than triple the design in the first half of 2021. This includes 2 Southeast Asian market leaders, either in Q2, a leading regional airline and one of the largest integrated car e-commerce platform. This demonstrates our strength once again being the travel e-commerce verticals and confirms our leadership in these sectors. 16 as of 1st of June 2022, up 40% compared to 43% a year ago. Revenue from new confound stood at 93% for the first half of 2022. We're selling efforts to reduce our current concentration and our top 2 plants now represent 57% of Q2 2022 revenue compared to 63% in Q2 2021. Now I hand over to Mr. Chin to cover the financials in detail as well as an update on the guidance.

Thank you, Laurent. Let me first share some details on our Q2 2022 financial performance. Revenue rose 23.3% to USD 170 million, driven by growth across the omnichannel CX and sales and digital marketing business. Adjusted EBITDA, which excludes share-based expense for the like-for-like comparison rose 23% to USD 36 million, while margins remained largely stable at 31%. Adjusted net income, which similarly excludes share-based expense rose to 35.5% to USD 22 million. Net profit for the period rose at an over 19.6% on a reported basis due largely to the relation of the performance share plan, which did not exceed in the same period last year as well as higher income tax expense.

Next, we share more details on our Q2 revenue performance by the services that we offered. Revenue for omnichannel CX solutions rose 19% to USD 16 million due mainly to higher business volumes driven by the expansion of existing contracts in the fat and technology verticals. In addition, business volumes for our 2 travel and hospitality clients have benefited from the gradual recovery from the impact of the COVID 19 pandemic, although the recovery has yet to reach pre pandemic average. Revenue from sales and digital marketing services increased by 54% to $28 million with the continuing volume expansion of existing Capex by key digital advertising and India clients. Commenting from Q2 2022, content monetary and moderation service has been renamed as content share at.

Revenue from trust and Safety that were previously classified under omnichannel CX solutions and other services fees, which can currently be reasonably an impact and 25 will now be reported as content trust and safety services. In Q2, due to revenue from content trust and safety services rose by 6% to USD 19 million, primarily due to an increase in business volume from a client in the travel and hospitality vertical. In Q2, 2 year, omnichannel CX makes up 59% of our business, while sales and digital marketing is at 24% and content trust and safety at 7%, respectively.

Let me next share some details on our expenses. For Q2 operating cost as a percentage of revenue stood at 77.5%. Excluding PSC costs on a like-for-like basis, this stood at 75.3%, lower than 79.3% for the same period last year, largely due to lower depreciation expenses. -- employee benefit expenses remained the largest portion of our total operating cost base. Our employee benefit expenses increased by 21% to USD 75 billion for Q2. Excluding PSP costs for a like-for-like basis, employment expense would have increased by 7%, high revenue growth of 23%, pursuant to higher wage cost of our staff costs and the increased competition for talent in the respective markets that we operate with. Our depreciation expense declined by 5%, largely due to certain of these evaluation assets in Singapore, Highland and is being fully initiated during the period with no big-ticket capital expenditures incurred. All other expenses, which include items such as recruitment, transport and telecommunication expenses rose 1% for Q2 2022, lower than our revenue growth, which balance sheets continued focus on prudent cost management.

Let me share some details of our first half 2018 financial performance. Revenue rose 25.1% to USD 226 million, seasonally driven by growth in the omnichannel CX and sales and digital marketing business segments. Adjusted EBITDA rose 29.3% to USD 17 million, with margins stable at 21.1%. Adjusted net income, which excludes the impact of share-based expense rose by 25.2% to USD 43 million. Net profit for the period rose at a lower 9.5% on a reported basis due largely to the implementation of its common share plan, which did not appear during the same year last year.

In terms of performance by services we offer, revenue for omnichannel solutions rose 11% to $173 million to 10 driven by the expansion of DCC campaign. Revenue from sales and digital marketing services increased by 7% to $51 million with the expansion of exceeding campaigns for key clients in the digital advertising and media verticals. Revenue from trust and safety services rose by 6% to USD 38 million primarily due to an incline for China in the channel and subsequent vertical. The first half is omnichannel we start 31% of our business, while sales and digital marketing is at 24% and content trust SAP, 7%, respectively.

Let me make share some details on our first half expenses. The first are lastly to me in what I shared earlier for Q2 2018. For first half 2019, operating costs as a percentage of revenue stood at 29.3%. Excluding PSC front, we grew at 75.7%, lower than 77.9% for the same period of 2021 due to lower situation expense. Adient expense increased by 35% to USD 150 million for first half and which have increased by 37%, excluding CFP costs due to higher rates and increased [profitive] dynamics of the Matalan market initial. Our intention expenses declined by 0.5%, largely due to sudden renovation assets depreciated. All other expenses rose by 4% for first half 2017, lower than our revenue growth, which inside our continuing attention to cost management. Lastly, let me provide an update on our full year 2022 outlook. We are reiterating the FY 2012 outlook, which should be our Q1 results announcement. Our full year penetration revenue guidance remains unchanged at $615 million. This represents a revenue growth rate of 21.1% to 21.6% compared to FY 2021. The company's financial information is stated in Capo.

Thank you, Mr. Chin for bringing us through the results presentation. We are now ready for Q&A. Before we start, can I just make a request that you keep your questions to 3 at the maximum. Thank you, operator, Q&A please?

(Operator Instructions) We got the first question from Pang Vit from Goldman Sachs.

Firstly, on the guidance, can you give any way why are you reiterating the current governance? What is the basis and consumption for this was the confident level that you can achieve? In particular, we do expect the end half growth to decelerate charge and first half on the video return in trouble in a, -- have you factored any of the impact on the inflation to margin guide down as well? So that's question number one. Question number 2, we noted a strong local addition in the quarter. So, any color you can provide around this? Who are the sector? In what countries you are representing them and what type of opportunity and what higher applied product and services you are serving. Furthermore, can you also provide any additional color about how much of the bone that we are seeing now is coming in from new logo versus existing customers? So that's question number 2. And last question, what is the management's current view around the global slowdown in the global tech space and that commenced around cutting costs, especially for your top social media clients. Any further color you can provide...

So yes, on the guidance, very clearly, we've reiterated our guidance for the full year as we have already revised in the last quarter. In retrospect, we were one of the first to go out there and guidance on new information we were having and really quickly transforming macroeconomics and geopolitical landscape at the time, which obviously has not improved much rather what was expected as the plan has been concerned. Now why did we reiterate our guidance, first of all, with just strong half that we have the first half of the year was recovered -- so decent results of 21 -- 25.1% growth in our revenue in the first half.

But also, I would want to commend my team for doing a fantastic job at operations and we've done very well through this summer as well. So, we really believe the results for us, and we see the efficiency of our operations and our management and our business development. So, we mentioned about building new logos. In first half, we brought in 3 tons of new logos than we did last year with 25 new logos. So that's helping us to obviously bring some more growth to the business. We're getting a bit closer every day through the end of the year. We, hence, have a bit more visibility, although visibility can come with a number of possible challenges around attrition, challenges around inflation, challenges around the variable key seasonality. So, we never completely sheltered or protected from what may happen before the end of the year.

Nonetheless, we have enough confidence at this moment to stick to our guidance. So that's important to reiterate. The new logo wings, which was your second question. So, a bit more color here. So, we are setting new logos in the second half -- second quarter, sorry, 25 to for the first half. You remember that in the first quarter, we won this short-form video platform. On the second quarter, the regional airline from Asia and e-commerce car platform that is a very exciting regional player. We bought 3 fintech companies, one insurance client. So, a variety of clients in different sectors, not just new economy as well in the nutrition space, a variety of logos as well our business element team has worked very well and as we perform a goal for that year.

And so, the continent is really boding in our ability to bring new business. So, the engine is working. We said it from the beginning, we came to listing with an objective to drive organic growth at our first entry point and we are delivering on that strong. So, our new goes are accelerating and the growth on these go really starting to pay off. I obviously point as well that they are now at 16 times that have been launched, but they are still tending in that group that have not been launched yet. So, there's some upside moving forward in the coming quarters. And so that's for the low going.

Now your question related to tech and how is that impacting us. We're looking not so much at the tech sector or really the businesses that all the big sectors that are impacting us or trading us. So, as you know, we have a quite bit of business in the digital advertising space, and we understand that the digitalized the helping space is going to a bit of pressure right now, and what we think is going to happen with possibly depending on the type of product lines that we're working like omnichannel CX solutions.

It could be under a bit of pressure for the digital advertising sector. But we reverse 2 of the Southern Digital market, where as the industry is getting more and more competitive, we can tee normally for our sales and digital marketing services, and we're seeing that in our numbers. It's growing at the fastest pace once even for TDCX. So that's one area that we are watching and watching the impact. Travel and hospitality are sectors that are picking up quite significantly as we speak and I think there's also a potential upside here with travel that has not recovered in North Asia, in Japan and not that much in Asia, in China.

So, when that comes, and I don't know when by happening, we'll see how it impacts us, but it will impact us favorably -- so that's how we are watching the space. Not every client in call back in the face of economic slowdown, some are more impacted than others and some are benefiting. So, I don't want to generalize as an inertia land everybody in one bag. But when we do our forecast and our plans, we take that into account and adjust the fall. So that's what I could share, and I hope that answers your question.

Next question is from Varun Ahuja from Credit Suisse.

I’ve got 3 questions. First, on if you comment on the visibility that you may have on the business process in terms of talk to clients, you've got 3 months visibility, 6 months visibility and compared to 6 months ago, 9 months ago, do you think that has reduced. So, I would love to hear how much comfort do you have in the next 3 to 6 months in terms of growth and the revenue? And if you can, in the same light comment upon your views on 2022 and it's still early, but how do you see it progressing during 2022 if there almost and with into second half now so I think market would like to how you see in 2023 as of now. Number 2, if you can, I know you talked about new client addition, which is 25%. But if I look at your number of clients is 60 and in December, it was around 52. So, there is again a significant churn. My understanding is you have completed that restructuring phase where we had with color unprofitable accounts.

So, it looks very high given you added 25 and there's a turn of 17 also. Is there anything you are missing here? What's happening on that dynamics enough to hear on that front? Third, if you can comment a little bit on the M&A side, given how you're looking at it, the cash flow remains healthy and M&A is part of your growth strategy. And given in this environment, the valuations of a lot of companies may have come down, especially on the private side. So how are you looking at that space, that will be helpful. And lastly, just one bookkeeping question. Tax rate has moved up this quarter. So then if you can comment how should we think about what has happened in this quarter? And should we think about over the next few years.

Thank you very much for the questions. So, regarding the visibility, if I understand correctly on your question, -- so it's a bit early for us to care for the visibility in terms of duration. We used out maybe 6 to 9 months of visibility. We've cut back to 3 to 6 months. We're still in this kind of range of vision and sales in terms of where our plants are budgeting in a few reasons. One of the uncertainties that the clients are facing in planning and processing and having to adapt in some occasions. The market relativities as well doesn't have very much. We're entering the budgeting process right now in the month of October with a number of our clients.

So, post that moment, I think we'll have a clearer view as to what 2023 is looking at. So, it is not unusual. It's quite common at this period of the year. but transited strategizing and we get involved in these discussions with thinking of ideas and how we're going to make the year and next year and what kind of projects we're going to be working on and what can of big ideas and we oppose to them. And so, this is beginning to happen as we speak as we enter September and (inaudible). So, visibility will hopefully expand next year is since it better economically. But for now, that's where we are, I would say.

On the finance side, we are, I think -- I mean maybe Jason later can talk some of the very detailed numbers, but I think it's a question of calculation here. You did mention there was a high churn. I want to confirm that there isn't a very, very, very good churn was not visible in any way at first to us. And the contrary, we've got a very high revenue retention and fine retention, as usual, and we're having plants just that in the numbers we've provided we just mentioned planate launched to design those that we've announced. We haven't launched them yet. That's what we're saying earlier on that we have an upside in this. But maybe, Jason, do you want to provide a bit more color here?

Yes. So, in addition, I think Varun you mentioned 52 clients as at December and although we added 25 for the half year, it doesn't add up into the total. We landed at 60 because there's still sort of over 10 clients that are not launched yet. So, the active client launch Hiom power is actually different from the logos that we have signed. So, I hope that helps. Can we just have you repeat the sort of -- I think the big question you have is on capital management, cash flow and capital management, is that correct?

Yes. And it's more on the M&A side, what you would think it has been almost 6 months since (inaudible).

Yes, absolutely. I can touch on M&A and then maybe later down we can talk about capital management. So, M&A, we've worked very hard on that front. As Edward Goh and his team has reviewed about close to 100 targets, if not more. An interesting situation here, some opportunities. Once again, I just want to reiterate that we're looking for a quality target. So obviously, I was the 100, there were a number of those that we need in the criteria where we studied from day 1.

Once again, we'll be -- we're looking for targets. We know that we can leverage our organic growth to be picky and choosy, and we absolutely are following this direction. But we have a nice pipeline, a nice portfolio. But as you know, there exit time to conclude, but we are quite settled on a number of projects here that I hope will bring to your attention soon and that will be interesting. But it takes time and obviously, we have some cash in the bank that we want to put 2 good deals, and that will be very useful. We have big growth targets. We want to accelerate our strategy so that's definitely working well for us at this stage and looking forward to telling you more about it.

And I think the last question was on the tax side as...

What was the question on tax?

So this quarter, the effective tax debt looks like around 29%. So, I think your discussion suggests that should be closer to 20% to 23% full year. So, anything which is happening there? And how should we think about the tax?

Yes. Okay. The tax situation for the Malaysian tax that is driven by 2 main factors. One is emulation of prosperity tax that we segment by the double ratio of last year's and also on budget. And for the quarter, quarter 2, we have the Philippines is a unit that used to enjoy the income tax quite for quite a while. We will have the FX holiday suspended due to the implementation of the turnoff status that we met on all the BDO player in the flip to compel a certain number of workers to be looking about it as opposed to the book from one situation and because the Philippines unit were unable to meet the target. There are some hits getting employees to come back to office. We had to incur this standard tax exposure for the Philippines unit effective from the second quarter that was announced by the government. And these are the 2 main factors to the higher tax expense for the group.

So before we sort of go to the other question on the line, I think we have a couple of questions on the webcast, asking us to clarify some data points during the call because I think the presentation was a bit mark for advance of voice. So just to clear up the questions, the top 2 customer concentration now is 57% as of Q2, 2022 versus 63% in Q2 last year. In terms of the travel and hospitality space, it grew at 25% versus Q2 last year. This is still some 16% of the highest ever peak quarter that we had in 2019. So those are kind of the data points that we are selling up. Operator, please next caller, next question on the line.

The next question is from Han Tan from HSBC.

My first question is, I noticed that you have been winning a lot of contracts with traditional non tech companies. So how do you think about these contracts from a margin or growth section -- do you expect these new accounts to be diluting the margin...

Yes, so I mean, we have a number of clients, the majority still remain very much in the new economy sector. We have a good range of clients who are -- and most of the range of our clients are in Asia Pacific, so in the fast-growth region as well. And although these are more traditional economy companies, we believe that they have still a nice growth potential due to the fact that we're coming in early in the relationship as well as they are in the fast-growing region. So, the tax, considering that still 93% of our business is the new economy and 91% of it is in Asia. It's not really material at this point. But we've also said that for quite some time as well. We are absolutely interested in the long new economy sector as well, it's good brands and good deals that we can sign with them where they have a need for, we have a large potential as well where we can gain market share.

So wondering if you could share you see any delays in any projects? And do you feel like you have sufficiently de-risked your revenue guidance? So, if there is macro slowdown in the third quarter, would that impact you at a (inaudible)?

Yes. I mean the -- if we be further slowdowns, we may be impacted. We have service our guidance in Q1 on the back of delays as well as lower visibility for some projects. So yes, some projects have been delayed for us in the past. We see still some slow implementation and that's something we factored in into the reiteration of our guidance at this point. We just watch tool and then watching the space over time to see whether this is going to continue. Is it going to accelerate or reduce. We don't have control, unfortunately, over client's decisions to either accelerate or slow down. And it depends on the sector as well, I mean if you look at the travel right now is the opposite of slowdown. It's really accelerating and clients are pushing us, and it's nice to watch.

My final question on vendor consolidation. How much are you seeing? And might this be a tailwind for growth maybe for the second half of the next year.

So you're talking about our competitors consolidating, right?

Yes. Are you winning market share from your competitors?

So I mean some -- we've seen some mergers, and we hear of maybe potential further mergers in the sector. So, the business is becoming a very, very scale focused. And this is something that we had anticipated. That's very much why we're going through the journey we're going through. The first one is expanding globally and having a global footprint is super important to us. To remain competitive in the face of growing larger scale competition, combined with clients who are getting bigger and more global, we want to contract with bigger global players. So TDCX is racing to reach that goal and through 2 ways, organic growth geographical expansion and then the second one is the important M&As we are pursuing right now to accelerate that objective. So yes, it's on our list of important strategic items that we won't progress as quickly as possible.

The next question is from Jonathan.

The first, I noticed there was almost a $10 million benefit from exchange differences from foreign Ops. Maybe could you elaborate a little bit on that and whether you expect this kind of benefit to continue moving into the second half of the year? And the second question is on share repurchasing. I think looks that about -- you've done about $10 million in share repurchases, while you've got about $20 million in terms of allocation to go, how can we maybe give us a little bit of color on that. How can we expect share repurchasing to continue moving forward for the rest of the year, given that there's only about -- slightly more than a quarter?

Jonathan, we are not sure where you got the $10 million FX benefit. I don't think we have that in our P&L. Maybe tell us which line, which specific line you're looking at?

It's the line, other comprehensive income.

Other comprehensive income. Okay, the translation effects of the foreign subsidiary’s net assets due to the movement of the currency against the current assets, which are not related to our business or related to the transactional above the property for tax. So that is a translation effect due to the currency transition of our net assets of our 4 subsidiaries. -- in all the countries that we operate. So, the top from mainly the Philippines, Malaysia -- the large units, if I may recall correctly the figure amount comes from those larger units as opposed to the smaller unit what we are now targeted. So that is nothing to do with the FX impact of our transactional level.

Jonathan's question around share buyback, indeed, for sort of the last 5 months since we started the share buyback program, we've decided by 2 key principals. First one is sort of valuation and how we stack up against the tiers in the broader market. But my true also on sort of the impact around liquidity and float. So, the management will continue to monitor based on these 2 guidelines. And we need to continue to implement this share buyback program given that we have announced a $30 million program, and we've deployed around $10 million to date.

There are no further questions at this time, and I hand back to the manager for closing comments.

I think, that was a bit premature because I see there's a line on -- there's KC on the line from CIMB.

I think just now you mentioned that most of your recent logo wins are from APAC. But just wondering if we could also be seeing potentially some logo wins from Western countries or potentially bigger campaigns, given that some of your peers are mentioning about offshoring trend in the BPO space.

Sorry, can you repeat the last line? Just the very last line.

Just wondering if management is seeing some offshoring trends, for example, potentially from international Internet firms or companies from the Western countries potentially offshoring the BPO services to APAC?

Yes, I think depending on how you look at offshore, we work for a number, and we've onboarded a number of those clients and those plants are all quite a lot of Western companies in addition to Asia originated companies who work on an offshore basis by doing a centralized operation, for example, in Malaysia or plan to cover multiple countries into one location as opposed to have a decentralized model per country. And then we have a number of clients that we've won that are more domestic. So, for example, in Japan, we have one insurance plan that is going to be joining us. That's pretty domestic. The other one is another one luxury client as well in Japan, domestic service, it's a variety. There's a travel client that is based in the U.S. to cover -- to offshore in Colombia. For example, -- so yes, the airline, the regional airline is the one central location in Asia where we are covering all the languages, for example. So offshore is still really at the center stage of what we do for the large majority of the work we do, if I got the question correct.

So let me just read out a couple of questions that we have from the webcast. For the new customer additions that we are getting, are they at the same margin profile or a different margin profile from existing customers?

Yes. There are a variety of margin profiles. We have a very strict band that we apply, depending on the strategy that we pursue and -- but in general, the mix of clients that we've got on board are meeting our criteria and our financial criteria, absolutely, as our CFO is quite peer.

Next question from Benjamin. Can you share more about which inflation, some color? And how are we managing rich inflation?

Do you want to cover? Can you cover Mr. Chi?

Yes. Yes, wage inflation is a factor that is impacting our operations as well. But on the strip side, I think we are also operating our resources more efficiently than ever before. I think in the case of cost escalation, efficient resources, utilization, enhanced productivity on our revenue is sure to help buffer against all these cost inflation inflationary factors. And on the fixed side, on the non-reg overhead we are also hedging some of our possible in the first half year, especially on our capacity side of things that depreciation is lower due to help address and buffer this reach pressure. So, in the nutshell, I think our increase when these several moving parts kind of help to address our wagon adverse issues.

Thanks, Mr. Xing. Next question from Jin Young. The growth of your top 2 customers seems to have slowed down. Any color on that, please?

So the -- 2 clients, as you know, quite important to us. Our concentration has come down, which is also a good thing. And it's a mixed back actually of situations. We think that the -- one of the environments that is a kind of challenging in the digital advertising could very well impact us, but it's also mitigated by the fact that we are quite strong in sales and digital marketing. And we think, like I said, I think earlier on that as the digital advertising market is becoming more and more competitive, our trends are probably an appetite for engaging us to do sales in digital marketing. So, we see that growing quite significantly. So, I couldn't possibly call out a slowdown, rather a significant increase. So, it's probably more of a rebalancing of the nature of the work we do for those clients that is important. And I'm talking about the digital advertising space in general. And as you know, we've brought in additional clients in the short-form video space. They're starting to -- they've been implemented. They're starting to really show up on our P&L. So that's good.

The travel and hospitality sector, which is another big sector for TCS is actually not slowing down the opposite. We've had the worst years behind us now. So, it grew 25% year-on-year versus 22% in Q2 2020. And then -- but it's still behind actually the 2019 numbers it's probably 16% behind what it used to be a bit higher. So, there is room for growth, taking into account again that Asia has not reopened yet, and we could be benefiting from that possibility. We just don't do no war. So -- and again, the 2 clients that we have is and then we have a good cohort of large trials that are becoming a mature and you're being follow lower revenue for us. And then a whole new -- a group of new logos that happen in accelerated growth into the mix. So, the plan overall is coming up quite nice replace.

Thank you, Laurent. Next question, again, from the webcast from Wilson on. Any update on the DNB? Is here. Let me take this one. The discussions are still ongoing, and we feel really good about where we are going with this. We hope to be able to share some further information with you as soon as possible. Obviously, I think, as Laurent just mentioned, on the back of that travel rebound very timely we're able to then depend that tie with this strategic client of ours. So still working on it. Just very much a bit, I hope to give the share something with you soon.

Thanks, Ed. I think we have time for just one last question. So last question on the line. 2 people asking the same questions, actually. Have we been able or are we able to build wage inflation to our new contracts?

Yes, actually, we are able to do this, and we have some clients who have the cost-of-living adjustment, but not all. So, we can't every time pass on that cost-of-living adjustment, but we've been successful in at a number of situations and occasions. And the suggestion that we're having is actually maybe to take the opportunity of really big crisis to go back again to our France in a very systematic manner and really ask for this to happen as a matter of protecting their interest, not just ours as well to retain the employees that they show value. So -- so thank you for the suggestion. But we have a number of clients who have the coal line and the contracts, some don't, and we are able to renegotiate when we're able to, in some cases, we're successful, sometimes we are not...

Thanks, Laurent. I think -- I know that's all the time we have on the call today. Thank you for spending time with us for joining us. If you have any follow-on questions, you can reach out to us to start to me after this.